5 Money Milestones to Hit by Age 40

No more making excuses -- by 40, you really need to get your financial house in order.Image source: Getty Images.

Turning 40 means facing the fact that you're a full-fledged adult with responsibilities you can't easily shake. It also means you should really have your finances in order. Here are five crucial money milestones you should aim to hit by the time you reach the big 4-0. 

1. Have a solid emergency fund

Building an emergency fund is something you should really do earlier in life, but if you missed that boat, consider this your wake-up call. Your emergency fund should trump all other financial goals, so if your savings account doesn't contain enough money to cover at least three months' worth of living expenses, start cutting back on spending to build some cash reserves. You might also consider getting a side job to generate extra cash, because having that safety net is crucial -- especially if you own a home or vehicle, each of which can lend itself to costly repairs. 

2. Pay off your credit card debt

Credit card debt doesn't only cost you money; it can also hurt your credit score, thereby making it harder for you to borrow affordably when you need to. If you're carrying a credit card balance, paying it off quickly will save you money on interest while freeing up cash for other important life goals. 

To get out of debt, assess your various credit card balances and pay them off in order of highest to lowest interest rate. Another option? Do a balance transfer. This will allow you to move your balances onto a new credit card with a lower interest rate, thereby making that debt easier to pay off. 

3. Start building retirement savings

Age 40 is a good time to get serious about retirement, especially if you've been neglecting your nest egg thus far. The sooner you start funding an IRA or 401(k), the more opportunity you'll have to grow a sizable amount of wealth in time for your golden years. And as the aforementioned accounts max out at $6,000 and $19,000 a year, respectively, for savers under 50, you don't have to contribute that much money on an annual basis if you can't afford to. Just be sure to save something, and then aim to ramp up your contributions as your circumstances allow.

Case in point: Socking away $400 a month from age 40 until age 65 will give you a nest egg of over $300,000 if your investments deliver an average annual 7% return during that time. Furthermore, if you have a 401(k) through work, you may be eligible for matching dollars from your employer, which will make building wealth even easier.

4. Buy life insurance

Chances are, by the time you turn 40, there will be someone in your life who depends on you financially to some degree, or who stands to get hurt financially if you were to pass away unexpectedly. It doesn't have to be a spouse or a child; it could be another family member, or someone you aren't related to. The point is that if you're without life insurance, it's smart to apply for it by the time you turn 40. The younger you are, the more affordable your premiums are likely to be. 

5. Make out a will

Without a will, you'll have no say in how your assets will be disbursed in the event of your untimely passing. Therefore, although sitting down with an attorney and spending a couple of hundred dollars to have a will drawn up may be awkward to think about, it pays to do so, and may even give you the peace of mind you never knew you were missing.

If you're nearing age 40, it's really time to get serious about your finances. Check these items off your list by the time that big birthday hits the calendar -- you'll be thankful you did.